Table of Contents
Acknowledgments —1
Introduction (Please Don’t Skip) —5
The Essence of the Book Boiled Down to 9 Graphs —11
1. The Defense of Marriage Act (DOMA) and the Consequences of the Windsor Decision —21
Chapter One Overview —21
United States v. Windsor: —22
The Back-Story —22
The Supreme Court Ruled DOMA Unconstitutional Because of Unequal Treatment in the Federal Estate Tax —23
Internal Revenue Service Extends the Windsor Decision in Revenue Ruling 2013-17 —23
The State of Celebration vs. the State of Domicile —24
My “Eureka!” Moment —25
Pennsylvania and Other States That Don’t Recognize Same-Sex Marriage —27
Tying the Knot or Not: Financial Considerations for Same-Sex Couples —29
As the Legal Landscape Changes, What Should You Do? —30
2. Optimizing IRAs & Retirement Plans for Same-Sex Couples —38
Overview of IRAs and Retirement Plans —38
Background: The Power of Retirement Plans While Working —39
Background: Which Dollars Should You Spend First in Retirement? —42
The Impact of Marriage on the Accumulation Years —45
How Should You Plan for Your IRA and Retirement Plan After Your Death? —48
The Tax Law for IRAs and Retirement Accounts as It Relates to Same-Sex Couples —49
Down to the Nitty Gritty —50
Who Can Inherit an IRA? —51
A Case Study of a Same-Sex Couple, Reviewing Finances for Surviving Spouse if One Person Dies and Leaves His IRA to His Partner/Spouse —54
The Couple Remains Unmarried (Given Current Laws on Inherited IRAs) —55
The Couple Marries —57
More Bad News if the Couple Remains Unmarried (Under Proposed Laws for Inherited IRAs) —60
Let’s Review the Numbers —62
The Case Study Continues for the Second Generation of Heirs, Reviewing Finances for the Child of the Surviving Partner —63
The Couple Remains Unmarried (Given Current Laws on Inherited IRAs) —63
The Couple Marries —63
Further Complications for the Child if the Couple Remains Unmarried and the “Stretch” Laws Change —66
Let’s Summarize the Numbers for the Case Study —69
First Let’s Simply Look at the Finances for the Couple —69
Managing an IRA After Death Is Very Important for The Well-Being of The Next Generation —70
Proposed Regulation Changes —72
3. Same-Sex Couples and Social Security Benefits —76
Significant Social Security Benefits for Married Couples —76
The Big Picture —78
Chapter Overview on Social Security —80
My Big Assumption… but I Could be Wrong —81
The Basics —83
Comparison of Taking Social Security at Age 62 or Age 70 —83
Running the Numbers for a Single Social Security Recipient —85
Delay Claiming Benefits to Provide Long-Term Security for Your Surviving Spouse —88
Scenario 1: Married, Surviving Spouse Collects Survivor Benefit —88
Scenario 2: Unmarried, No Survivor Benefit for Surviving Partner —89
Coming Out Later in Life and Protecting Your Partner —90
The Current Policy of the Social Security Administration —92
Strategies to Maximize Social Security Benefits —94
Spousal Benefits —95
Using the “Apply and Suspend” Strategy to Enhance Cumulative Benefits —96
Here’s How It Works —97
Should the “Apply and Suspend” Technique Factor into a Decision to Get Married? —98
An Alternative Strategy: Claim Now, Claim More Later —104
Summary of the Key Points and Five Strategies You Can Use To Maximize Your Social Security Benefits —104
4. Income Tax Changes for Married Same-Sex Couples —109
How the Federal Income Tax Has Changed for Married Same-Sex Couples —109
All Legally Married Same-Sex Couples Should Review Their Federal Income Tax Returns and Make the Appropriate Changes —110
Are There Good Financial Reasons to Get Legally Married? —112
The Advantages and Disadvantages of Marriage on Your Federal Income Tax Return —112
Examples of the Marriage Bonus from Filing Jointly —113
Example of the Marriage Penalty from Filing Jointly —113
Maybe Marriage is a Good Idea if You are Selling Your House —114
Your Age Might Also Factor into Your Decision —114
Further Financial Considerations to Have on Your Radar —115
What Is Your Filing Status for State Income Tax Purposes? —117
5. Trusts for Same-Sex Couples —119
Providing For Your Partner after You Die While Still Protecting Your Beneficiaries (Who Are Not the Same People as Your Partner’s Beneficiaries) —119
How a Standard Trust Works —121
How a Traditional Trust Defines Income —122
Use a Different Definition to Define Income —122
A Concept Called the Total Return Trust —123
Avoiding Conflict among Beneficiaries and Other Issues —124
A Simple Solution When You Want to Provide for Your Partner and Other Heirs —125
Life Insurance —126
Providing for Your Partner without Extended Family Constraints —126
An Alternative Solution is an Agreement with Your Partner —127
Trust Basics and Situations When a Trust May Be Appropriate —130
Naming a Trust as the Beneficiary of an IRA —131
Using a Trust to Provide Protection for a Minor —131
Trusts for Adult Beneficiaries —132
Giving Your Beneficiaries the Right to Disclaim to Other Beneficiaries —133
A Trust for a Special Needs Beneficiary —134
Choosing a Trustee for Your Trust —135
Is Using a Trust a Good Idea for You? —136
6. The Changing World of Health Insurance —137
Introduction: The Affordable Care Act —137
Filing Requirements for Tax Credits —138
New Tax Regulations for Employer Provided Health Care Plans for Same-Sex Couples —139
The Financial Implications of Marriage on Same-Sex Health Insurance Options —142
7. Federal and State Gift, Estate, and Inheritance Taxes —144
An Overview of Transfer Taxes —144
Gifting Between Spouses in Non-Recognition States Can Eliminate Inheritance Taxes —146
Additional Gift Considerations —147
8. Putting All the Pieces Together —149
A Case Study Spanning the Later Years of Life for a Same-Sex Couple —154
Finances for this Couple While They are Both Living—Using All of the Advice in this Book —156
Let’s Take Our Case Study to the Next Phase in Life—the Death of One Spouse/Partner —159
Finances for the Surviving Partner/Spouse—Using All of the Advice in this Book —160
The Case Study Continues With the Second Death—What About the Next Generation? —170
Let’s Take a Look at the Long Term Growth Potential for the Couple’s Heir if They Follow All of the Advice in This Book —170
Final Note —173
Appendix: How We “Run the Numbers” —175
